BUDAPEST–Hungary left its main interest rate unchanged at a record low for the second month in a row on Tuesday, keeping faith in its policy to propel sluggish inflation and maintain momentum in the economy.

The National Bank of Hungary kept the main monetary policy rate at 2.1%, in line with its July pledge not to alter it until the end of next year, and follows a two-year-long easing cycle that started in August 2012, when the key rate stood at 7%.

The bank’s decision was in line with the expectations of 13 economists in a Wall Street Journal poll.

Deputy Governor Adam Balog told the Journal last week the bank was committed to keeping rates at a record low until the end of 2015 and that he saw no room to go lower, as the central bank works to cut the country’s international debt exposure to avoid having to tighten monetary policy if emerging-market turmoil resurfaces; the bank would only do so should a crisis were to hit and if all other tools were exploited, he said. Read More »

Nyiregyhaza, HUNGARY–Hungary’s central bank is ready to use part of the country’s foreign-currency reserves to help the government rid households of their costly foreign-currency mortgages, a top central bank official said over the weekend.

While ensuring that the reduction in the country’s foreign-currency reserves were gradual, the central bank would provide the foreign currency to retail banks so they could convert foreign-currency mortgages into the local currency, said Adam Balog, a deputy governor at the National Bank of Hungary.

Retail banks need foreign currency to convert foreign-exchange mortgages into Hungarian forints. Should they need to tap the currency market to buy it, the Hungarian forint would likely weaken sharply. The central bank is willing to provide that foreign currency to them at market rates, Mr. Balog said.

The central bank is capable of providing the funds to the banks in a single step, even at some point during the remainder of this year, Mr. Balog said in a speech at the annual meeting of the Hungarian Economists’ Association. Read More »

BUDAPEST–Standard & Poor’s Ratings Services warned Friday that it may downgrade Hungary further into non-investment grade over the next 12 months should government policies weaken investor confidence and the outlook for recovery.

S&P affirmed its ‘BB/B’ long- and short-term sovereign credit ratings on Hungary, and ‘BB’ long-term issuer credit rating on the National Bank of Hungary, with a negative outlook. Hungary’s creditworthiness remains constrained by its poor growth outlook, limited monetary policy room, and mounting public as well as private-sector debt, it said.

Hungary’s current government has reduced public debt, an official was quick to note. The government, which is seeking reelection in about six months, retired its outstanding International Monetary Fund debt ahead of schedule earlier this year.

The Socialists, the biggest opposition party, disagreed with the government, saying it has wasted the money taken away from private pension funds. Read More »

Hungary’s central bank cut its main rate to a fresh record low on Tuesday, continuing an easing cycle it began well before the arrival this month of a new chief who advocates using monetary policy to help the country emerge from its deep recession.

With inflation at a near seven-year low, the decision shows the National Bank of Hungary isn’t worried about weakness in the Hungarian currency and prefers to use its tools to spur economic growth.

The quarter-point cut was the eighth consecutive monthly easing since August, bringing the rate down to an all time low 5.00% from 5.25%.

This was the first rate meeting headed by former economy minister Gyorgy Matolcsy, who took over as governor on March 3 from Andras Simor, the previous governor, who was often sparred with Prime Minister Viktor Orban over central bank independence.

Mr. Matolcsy is one of Orban’s closest allies and the architect of the government’s divisive and unorthodox economic policy.

Tuesday’s meeting was also the first for the expanded rate council, which includes two new members who were appointed alongside Mr. Matolcsy. Vice Governor Adam Balog and Gyula Pleschinger are also both former top officials in the economy ministry.

It was the last rate meeting for deputy Governor Ferenc Karvalits, whose six-year mandate expires March 27, and who has been against the rate cuts at each rate meeting of the past seven months. Read More »

BUDAPEST–Hungary’s new central bank vice governor lashed out at the “unwelcome” recent slide in the forint Wednesday, but said the National Bank of Hungary has no fixed target for exchange rates.

The Hungarian currency has dropped by over 4% so far this month, sliding to HUF307.29 against the euro on Wednesday–the forint’s weakest point since January last year–as traders and investors take fright at a shake-up at the central bank and new constitutional changes.

“The recent exchange rate fluctuations are not justified by fundamentals and unwelcome for Hungary’s economy,” Adam Balog said in a written response to questions posed by the Wall Street Journal, in his first press comments since his appointment last week.

The central bank will probably cut interest rates by not more than 0.25 percentage point at its next rate meeting March 26, Mr. Balog indicated. Expectations for a higher, 0.50 percentage point cut rose after February’s lower-than-expected inflation data, which, at an annual 2.8%, came in lower than the central bank’s 3% medium-term inflation target. Read More »

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Emerging Europe Real Time provides sharp analysis and insight into what’s making news in Central and Eastern Europe. Drawing on the expertise of our reporters in the Czech Republic, Hungary, Poland, Russia and Turkey, the site provides an inside track on economics, politics and business in this emerging part of the European continent.